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S.P.

JAIN INSTITUTE OF MANAGEMENT AND RESEARCH


MUMBAI - INDIA

Executive MBA
Batch 13 A (2006 – 08)

A Report on

L&T - WIND ENERGY SECTOR AS A NEW LINE


OF BUSINESS

Submitted to

Mr. Ashok Rao

In fulfillment of the course requirement for Project Report

Submitted by

Badech Raghveer Singh EMBA/13/45

Project Guide – Prof . Harsh Mohan

Mentor – Mr. Kumar Rudra


A) Synopsis…………………………………………………………………………...1

B) Chapters
1. Introduction……………………………………………………………......2
1.1 Wind Energy Basics……………………………………………….…..2
1.2 Wind Energy Cost……………………………………………………..6

2. Current status of Wind energy market…………………………………….9


2.1 Global Wind Energy Sector…………………………………………...9
2.1.1 Africa………………………………………………………14
2.1.2 Asia………………………………………………………...14
2.1.3 Australia & Oceania………………………………………..15
2.1.4 Europe……………………………………………………...15
2.1.5 Latin America……………………………………………...16
2.1.6 North America……………………………………………..16
2.1.7 Offshore – wind farms……………………………………..17
2.1.8 SWOT Analysis……………………………………………19
2.2 Indian Wind Energy Sector……………………………………….….19
2.2.1 Wind Power development in India………………………...21
2.2.2 The Wind energy Policy structure in India………………...23
2.2.3 The Current Scenario……………………………………....24
2.2.4 Foreign Investment Policy………………………………....24
2.2.5 Regulatory Issues…………………………………………..25
2.2.6 SWOT Analysis…………………………………………....26

3. Elements of a Wind Project (Value Chain)………………………………28


3.1 Design, planning & supervision……………………………………...28
3.2 Pure component manufacturer……………………………………….30
3.3 Installation and Operation & Maintenance…………………………..31
3.4 Fully integrated service providers……………………………………34

4. Larsen & Toubro Limited………………………………………………..35


4.1 Prologue……………………………………………………………...35
4.2 Wind Energy Industry (Porter’s five force analysis)………………...36
4.3 SWOT analysis – L&T ……………………………………………...37
4.4 SWOT analysis – L&T in Wind Energy Industry…………………...39

5. Opportunities in the Wind energy market………………………………..43


5.1 International energy market………………………………………….43
5.1.1 Wind Power Development Strategies – Europe……………43
5.1.2 Wind Power Development Strategies – United States……..45
5.1.3 Wind Power Development Strategies – China……………..46
5.1.4 Wind Power Development Strategies – Offshore.................46
5.2 Domestic energy market……………………………………………..48
6. Strategies for the Wind Energy Sector…………………………………...49

C) Appendix & Tables:


1. Country-wise capacity details (as on end 2008)…………………………51
2. India - Policy & Regulation website links……………………………….53
3. India – State-wise installed capacity……………………………………..54
4. India – Tariff & Regulations……………………………………………..56
5. India – Central Incentives………………………………………………..57
6. Related Companies – website links ……………………………………..59
7. Larsen & Toubro – Organizational Structure…………………………....60

D) References.…………………………………………………….……………….61
S. P. Jain Institute of Management & Research EMBA

Synopsis:

International wind markets have seen another impressive year in 2008, with over
27 GW of new capacity brought online and a total installed capacity close to 121GW.
Over the past three years the global wind turbine market has seen explosive growth in
terms of competitors, capacity investments, and project orders as the industry races to
keep up with booming global demand. Scaling exponentially in nearly all dimensions—
including the size of turbines, projects, and buyers .The growth in 2008 was primarily
driven by developments in China and the US, but other markets are also starting to
emerge on the wind energy map — the industry is generating enormous opportunities for
all players, as well as challenges to improve competitiveness and position wind energy as
a long-term, reliable source of power generation.

Key trends in the international wind market include:

♦ Competition among wind turbine OEMs is rapidly intensifying as growth extends


to new regions, encouraging start-ups of new manufacturers while pushing leading
suppliers to expand their sales and production globally.

♦ Turbine prices, and the costs of installation, have trended upward over the last
four years after nearly a decade of cost reductions per megawatt of nameplate
capacity. The global market’s boom in demand has clearly shifted the industry from a
buyer’s to a seller’s market in the past three years, with corresponding price
increases.

♦ Multiple players moving on 2 MW and above segment: Vestas and Enercon—


pioneers in 2 MW and larger turbines—are aiming to protect their share of this
market. However, multiple proven machines from Gamesa, Siemens,
Suzlon/REpower, Alstom/Ecotecnia and others are providing buyers more options.

♦ Component suppliers face new challenges to keep pace with turbine demand,
calling for major production capacity investments in the multi-megawatt segment, as
well as a focus on local supply in booming new markets while keeping costs
competitive.

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1. Introduction
In order to understand the business of wind power we must initially understand the basic
fundamentals and terms which are common in the arena of wind energy and its related
businesses.

1.1 Wind Energy Basics:

What is wind energy?


In reality, wind energy is a converted form of solar energy. The sun's radiation heats
different parts of the earth at different rates-most notably during the day and night, but
also when different surfaces (for example, water and land) absorb or reflect at different
rates. This in turn causes portions of the atmosphere to warm differently. Hot air rises,
reducing the atmospheric pressure at the earth's surface, and cooler air is drawn in to
replace it. The result is wind.

Air has mass, and when it is in motion, it contains the energy of that motion ("kinetic
energy"). Some portion of that energy can convert into other forms mechanical force or
electricity that we can use to perform work.

What is a wind turbine and how does it work?


A wind energy system transforms the kinetic energy of the wind into mechanical or
electrical energy that can be harnessed for practical use. Mechanical energy is most
commonly used for pumping water in rural or remote locations- the "farm windmill" still
seen in many rural areas of the U.S. is a mechanical wind pumper - but it can also be used
for many other purposes (grinding grain, sawing, pushing a sailboat, etc.). Wind electric
turbines generate electricity for homes and businesses and for sale to utilities.

There are two basic designs of wind electric turbines: vertical-axis, or "egg-beater" style,
and horizontal-axis (propeller-style) machines. Horizontal-axis wind turbines are most
common today, constituting nearly all of the "utility-scale" (100 kilowatts, kW, capacity
and larger) turbines in the global market.

Turbine subsystems include:

• a rotor, or blades, which convert the wind's energy into rotational shaft energy;
• a nacelle (enclosure) containing a drive train, usually including a gearbox* and a
generator;
• a tower, to support the rotor and drive train; and
• Electronic equipment such as controls, electrical cables, ground support
equipment, and interconnection equipment

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*Some turbines do not require a gearbox

Wind turbines vary in size. This chart depicts a variety of historical turbine sizes and the
amount of electricity they are each capable of generating (the turbine's capacity, or power
rating).

1981 1985 1990 1996 1999 2000


Rotor (meters) 10 17 27 40 50 71
Rating (KW) 25 100 225 550 750 1,650
Annual MWh 45 220 550 1,480 2,200 5,600

The electricity generated by a utility-scale wind turbine is normally collected and fed into
utility power lines, where it is mixed with electricity from other power plants and
delivered to utility customers.

What is wind turbines made of?


The towers are mostly tubular and made of steel. The blades are made of fiberglass-
reinforced polyester or wood-epoxy.

How big is a wind turbine?


Utility-scale wind turbines for land-based wind farms come in various sizes, with rotor
diameters ranging from about 50 meters to about 90 meters, and with towers of roughly

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the same size. A 90-meter machine, definitely at the large end of the scale at this writing,
with a 90-meter tower would have a total height from the tower base to the tip of the rotor
of approximately 135 meters (442 feet).

Offshore turbine designs are under further development and will have larger rotors—at
the moment, the largest has a 110-meter rotor diameter—because it is easier to transport
large rotor blades by ship than by land.

Small wind turbines intended for residential or small business use are much smaller. Most
have rotor diameters of 8 meters or less and would be mounted on towers of 40 meters in
height or less.

How much electricity can one wind turbine generate?


The ability to generate electricity is measured in watts. Watts are very small units, so the
terms kilowatt (kW, 1,000 watts), megawatt (MW, 1 million watts), and gigawatt
(pronounced "jig-a-watt," GW, 1 billion watts) are most commonly used to describe the
capacity of generating units like wind turbines or other power plants.

Electricity production and consumption are most commonly measured in kilowatt-hours


(kWh). A kilowatt-hour means one kilowatt (1,000 watts) of electricity produced or
consumed for one hour. One 50-watt light bulb left on for 20 hours consumes one
kilowatt-hour of electricity (50 watts x 20 hours = 1,000 watt-hours = 1 kilowatt-hour).

The output of a wind turbine depends on the turbine's size and the wind's speed through
the rotor. Wind turbines being manufactured now have power ratings ranging from 250
watts to 5 megawatts (MW).

Example: A 10-kW wind turbine can generate about 10,000 kWh annually at a site with
wind speeds averaging 12 miles per hour, or about enough to power a typical household.
A 5-MW turbine can produce more than 15 million kWh in a year--enough to power
more than 1, 400 households. The average U.S. household consumes about 10,000 kWh
of electricity each year.

Example: A 250-kW turbine installed at the elementary school in Spirit Lake, Iowa,
provides an average of 350,000 kWh of electricity per year, more than is necessary for
the 53,000-square-foot school. Excess electricity fed into the local utility system earned
the school $25,000 in its first five years of operation. The school uses electricity from the
utility at times when the wind does not blow. This project has been so successful that the
Spirit Lake school district has since installed a second turbine with a capacity of 750 kW.

Wind speed is a crucial element in projecting turbine performance, and a site's wind
speed is measured through wind resource assessment prior to a wind system's
construction. Generally, an annual average wind speed greater than four meters per
second (m/s) (9 mph) is required for small wind electric turbines (less wind is required
for water-pumping operations). Utility-scale wind power plants require minimum average
wind speeds of 6 m/s (13 mph).

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The power available in the wind is proportional to the cube of its speed, which means that
doubling the wind speed increases the available power by a factor of eight. Thus, a
turbine operating at a site with an average wind speed of 12 mph could in theory generate
about 33% more electricity than one at an 11-mph site, because the cube of 12 (1,768) is
33% larger than the cube of 11 (1,331). (In the real world, the turbine will not produce
quite that much more electricity, but it will still generate much more than the 9%
difference in wind speed.) The important thing to understand is that what seems like a
small difference in wind speed can mean a large difference in available energy and in
electricity produced, and therefore, a large difference in the cost of the electricity
generated. Also, there is little energy to be harvested at very low wind speeds (6-mph
winds contain less than one-eighth the energy of 12-mph winds).

How many turbines does it take to make one megawatt (MW)?


Most manufacturers of utility-scale turbines offer machines in the 700-kW to 2.5-MW
range. Ten 700-kW units would make a 7-MW wind plant, while 10 2.5-MW machines
would make a 25-MW facility. In the future, machines of larger size will be available,
although they will probably be installed offshore, where larger transportation and
construction equipment can be used. Units up to 5 MW in capacity are now under
development.

How many homes can one megawatt of wind energy supply?


An average U.S. household uses about 10,655 kilowatt-hours (kWh) of electricity each
year. One megawatt of wind energy can generate from 2.4 to more than 3 million kWh
annually. Therefore, a megawatt of wind generates about as much electricity as 225 to
300 households use. It is important to note that since the wind does not blow all of the
time, it cannot be the only power source for that many households without some form of
storage system. The "number of homes served" is just a convenient way to translate a
quantity of electricity into a familiar term that people can understand. (Typically, storage
is not needed, because wind generators are only part of the power plants on a utility
system, and other fuel sources are used when the wind is not blowing. )

What is a wind power plant?


The most economical application of wind electric turbines is in groups of large machines
(660 kW and up), called "wind power plants" or "wind farms."

Wind plants can range in size from a few megawatts to hundreds of megawatts in
capacity. Wind power plants are "modular," which means they consist of small individual
modules (the turbines) and can easily be made larger or smaller as needed. Turbines can
be added as electricity demand grows. Today, a 50-MW wind farm can be completed in
18 months to two years. Most of that time is needed for measuring the wind and
obtaining construction permits—the wind farm itself can be built in less than six months.

What is "capacity factor"?


Capacity factor is one element in measuring the productivity of a wind turbine or any
other power production facility. It compares the plant's actual production over a given

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period of time with the amount of power the plant would have produced if it had run at
full capacity for the same amount of time.

A conventional utility power plant uses fuel, so it will normally run much of the time
unless it is idled by equipment problems or for maintenance. A capacity factor of 40% to
80% is typical for conventional plants.

A wind plant is "fueled" by the wind, which blows steadily at times and not at all at other
times. Although modern utility-scale wind turbines typically operate 65% to 90% of the
time, they often run at less than full capacity. Therefore, a capacity factor of 25% to 40%
is common, although they may achieve higher capacity factors during windy weeks or
months.
It is important to note that while capacity factor is almost entirely a matter of reliability
for a fueled power plant, it is not for a wind plant—for a wind plant, it is a matter of
economical turbine design. With a very large rotor and a very small generator, a wind
turbine would run at full capacity whenever the wind blew and would have a 60-80%
capacity factor—but it would produce very little electricity. The most electricity per
dollar of investment is gained by using a larger generator and accepting the fact that the
capacity factor will be lower as a result. Wind turbines are fundamentally different from
fueled power plants in this respect.

If a wind turbine's capacity factor is 33%, doesn't that mean it is only running one-
third of the time?
No. A wind turbine at a typical location in the Midwestern U.S. should run about 65-90%
of the time. However, much of the time it will be generating at less than full capacity (see
previous answer), making its capacity factor lower.

What is "availability" or "availability factor"?


Availability factor (or just "availability") is a measurement of the reliability of a wind
turbine or other power plant. It refers to the percentage of time that a plant is ready to
generate (that is, not out of service for maintenance or repairs). Modern wind turbines
have an availability of more than 98%--higher than most other types of power plant.
After more than two decades of constant engineering refinement, today's wind machines
are highly reliable.

1.2 Wind Energy Costs:


A number of factors determine the economics of utility-scale wind energy and its
competitiveness in the energy marketplace. The cost of wind energy varies widely
depending upon the wind speed at a given project site. The energy that can be tapped
from the wind is proportional to the cube of the wind speed, so a slight increase in wind
speed results in a large increase in electricity generation. Consider two sites, one with an
average wind speed of 14 miles per hour (mph) and the other with average winds of 16
mph. All other things being equal, a wind turbine at the second site will generate nearly
50% more electricity than it would at the first location.

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The three examples above are for costs per kilowatt-hour for a 51 MW wind farm
at three different average wind speeds expressed in meters per second. Cost
figures include the current wind production tax credit.

Improvements in turbine design bring down costs. The taller the turbine tower and the
larger the area swept by the blades, the more powerful and productive the turbine. The
swept area of a turbine rotor (a circle) is a function of the square of the blade length (the
circle’s radius).

Therefore, a fivefold increase in rotor diameter (from 10 meters on a 25-kW turbine like
those built in the 1980s to 50 meters on a 750-kW turbine common today) yields a 55-
fold increase in yearly electricity output, partly because the swept area is 25 times larger
and partly because the tower height has increased substantially, and wind speeds increase
with distance from the ground. Advances in electronic monitoring and controls, blade
design, and other features have also contributed to a drop in cost. The following table
shows how a modern 1.65-MW turbine generates 120 times the electricity at one-sixth
the cost of an older 25-kW turbine:

A large wind farm is more economical than a small one. Assuming the same average
wind speed of 18 mph and identical wind turbine sizes, a 3–MW wind project delivers
electricity at a cost of $0.059 per kWh and a 51-MW project delivers electricity at $0.036
per kWh—a drop in costs of $0.023, or nearly 40%. Any project has transaction costs
that can be spread over more kilowatt-hours with a larger project. Similarly, a larger
project has lower O&M (operations and maintenance) costs per kilowatt-hour because of
the efficiencies of managing a larger wind farm.

Optimal configuration of the turbines to take the best advantage of micro-features on


the terrain will also improve a project's productivity.

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The cost of financing affects the cost of wind energy. Wind energy is capital-intensive,
so the cost of financing constitutes a large variable in a wind energy project's economics.
For a variety of reason financing for wind project remains more expensive than for
mainstream form of electricity generation.

Project ownership affects cost of financing and the economics of a wind power project.
Independent ownership—that is, financing of projects by private power producers on a
stand-alone basis, is more expensive than utility-owned financing.

How do utility-scale wind power plants compare in cost to other renewable energy
sources?
Wind is the low-cost emerging renewable energy resource.

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2. Current Status of Wind Energy Market


In order to understand the available business opportunity in the wind energy market we
need to initially access the existing global wind energy market and determine future
growth areas in various subcontinents globally

2.1 Global Wind Energy Sector

Salient features

™ Worldwide capacity reaches 121,188 MW, out of which 27,261 MW were added
in 2008.
™ Wind energy continued its growth in 2008 at an increased rate of 29 %.
™ All wind turbines installed by the end of 2008 worldwide are generating 260 TWh
per annum, equaling more than 1.5 % of the global electricity consumption.
™ The wind sector became a global job generator and has created 440,000 jobs
worldwide.
™ The wind sector represented in 2008 a turnover of 40 billion Euros.
™ For the first time in more than a decade, the USA took over the number one
position from Germany in terms of total installations.
™ China continues its role as the most dynamic wind market in the year 2008, more
than doubling the installations for the third time in a row, with today more than 12
GW of wind turbines installed.
™ North America and Asia catch up in terms of new installations with Europe which
shows stagnation.
™ Based on accelerated development and further improved policies, a global
capacity of more than 1,500,000 MW is possible by the year 2020.

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General Situation:

Wind energy has continued the worldwide success story as the most dynamically growing
energy source again in the year 2008. Since 2005, global wind installations more than
doubled. They reached 121,188 MW, after 59,024 MW in 2005, 74,151 MW in 2006, and
93,927 MW in 2007. The turnover of the wind sector worldwide reached 40 billion in the
year 2008. The market for new wind turbines showed a 42 % increase and reached an
overall size of 27,261 MW, after 19,776 MW in 2007 and 15,127 MW in the year 2006.
Ten years ago, the market for new wind turbines had a size of 2,187 MW, less than one
tenth of the size in 2008. In comparison, no new nuclear reactor started operation in 2008,
according to the International Atomic Energy Agency.

Leading Wind Market:

The USA and China took the lead, USA taking over the global number one position from
Germany and China getting ahead of India for the first time, taking the lead in Asia. The
USA and China accounted for 50.8 % of the wind turbine sales in 2008 and the eight
leading markets represented almost 80 % of the market for new wind turbines – one year
ago, still only five markets represented 80 % of the global sales. The pioneer country
Denmark fell back to rank 9 in terms of total capacity, whilst until four years ago it held
the number 4 position during several years. However, with a wind power share of around
20 % of the electricity supply, Denmark is still a leading wind energy country worldwide.

Offshore wind energy

By the end of the year 2008, 1,473 MW of wind turbines were in operation offshore,
more than 99 % of it in Europe, representing slightly more than 1 % of the total installed

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wind turbine capacity. 350 MW were added offshore in 2008, equaling a growth rate of
30 %.

Diversification continues:

This development goes hand in hand with a general diversification process which can be
watched with today 16 markets having installations of more than 1,000 MW, compared
with 13 countries one year ago. 32 countries have more than 100 MW installed,
compared with 24 countries three years ago. Altogether 76 countries are today using wind
energy on a commercial basis. Newcomers on the list are two Asian countries, Pakistan
and Mongolia, which both for the first time installed larger grid-connected wind turbines.

Increasing growth rates:

An important indicator for the vitality of the wind market is the growth rate in relation to
the installed capacity of the previous year. The growth rate went up steadily since the
year 2004, reaching 29.0 % in 2008, after 26.6 % in 2007, 25.6 % in the year 2006 and
23.8 % in 2005. However, this increase in the average growth rate is mainly due to the
fact that the two biggest markets showed growth rates far above the average: USA 50 %
and China 107 %. Bulgaria showed the highest growth rate with 177 %, however, starting
from a low level. Also Australia, Poland, Turkey and Ireland showed a dynamic growth
far above the average.

Wind energy as an answer to the global crisis:

In light of the threefold global crisis mankind is facing currently – the energy crisis, the
finance crisis and the environment/climate crisis – it is becoming more and more obvious
that wind energy offers solutions to all of these huge challenges, offering a domestic,
reliable, affordable and clean energy supply. At this point of time it is difficult to predict
the short-term impacts of the credit crunch on investment in wind energy. However,
currently smaller projects under stable policy frameworks like well-designed feed-in
tariffs are less affected by the credit crunch than higher-risk investments e.g. in large

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offshore wind farms or under unstable political frameworks and in countries which are
seen as not offering sufficient legal stability.

Wind energy as a low-risk investment

In the mid to long term it is clear that wind energy investments will rather be
strengthened due to their low-risk character and societal and additional economic
benefits. Investment in a wind turbine today means that the electricity generation cost are
fixed to the major extend over the lifetime of the wind turbine. Wind energy implies no
expenses on fuel and operation and maintenance costs are usually well predictable and
rather marginal, in relation to the overall investment.

Employment: Wind energy as job generator

One fundamental advantage of wind energy is that it replaces expenditure on mostly


imported fossil or nuclear energy resources by human capacities and labor. Wind energy
utilization creates many more jobs than centralized, non-renewable energy sources. The
wind sector worldwide has become a major job generator: Within only three years, the
wind sector worldwide almost doubled the number of jobs from 235,000 in 2005 to
440,000 in the year 2008. These 440,000 employees in the wind sector worldwide, most
of them highly skilled jobs, are contributing to the generation of 260 TWh of electricity.

Future prospects worldwide

Based on the experience and growth rates of the past years, it is expected that wind
energy will continue its dynamic development also in the coming years. Although the
short term impacts of the current finance crisis makes short-term predictions rather
difficult, it can be expected that in the mid-term wind energy will rather attract more
investors due to its low risk character and the need for clean and reliable energy sources.
More and more governments understand the manifold benefits of wind energy and are
setting up favorable policies, including those that are stimulation decentralized
investment by independent power producers, small and medium sized enterprises and
community based projects, all of which will be main drivers for a more sustainable
energy system also in the future. Carefully calculating and taking into account some
insecurity factors, wind energy will be able to contribute in the year 2020 at least 12 % of
global electricity consumption. By the year 2020, at least 1,500,000 MW can be expected
to be installed globally. A recently published study by the Energy Watch Group reveals –
as one out of four described scenarios – that by the year 2025 it is even likely to have
7,500,000 MW installed worldwide producing 16,400 TWh. All renewable energies
together would exceed 50 % of the global electricity supply. As a result, wind energy,
along with solar, would conquer a 50 % market share of new power plant installations
worldwide by 2019. Global non-renewable power generation would peak in 2018 and
could be phased out completely by 2037.

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Continental Scenarios:

In terms of continental distribution, a continuous diversification process can be watched


as well: In general, the focus of the wind sector moves away from Europe to Asia and
North America. Europe decreased its share in total installed capacity from 65.5 % in 2006
to 61 % in the year 2007 further down to 54.6 % in 2008. Only four years ago Europe
dominated the world market with 70.7 % of the new capacity. In 2008 the continent lost
this position and, for the first time, Europe (32.8 %), North America (32.6 %) and Asia
(31.5 %) account for almost similar shares in new capacity. However, Europe is still the
strongest continent while North America and Asia are increasing rapidly their shares. The
countries in Latin America and Africa counted for respectively only 0.6 % and 0.5 % of
the total capacity and fell back in terms of new installations down to respectively only 0.4
% and 0.3 % of the additional capacity installed worldwide in the year 2008.

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2.1.1 Africa:

In spite of the huge potentials all over the continent, with world’s best sites in the North
and South of the continent, wind energy plays still a marginal role on the continent with
563 MW of total capacity. Several major wind farms can be found in some of the North
African countries like Morocco, Egypt or Tunisia. In the year 2009 and 2010, substantial
increases can be expected from projects which are already in the development stage.
However, so far, the emergence of domestic wind industry in African countries is only in
a very early stage and donor organizations should put a special focus on the creation of
markets which enable industries to emerge. However, it is interesting to see that
companies from the region are showing an increasing interest and have started investing
in the wind sector. In Sub-Saharan Africa, the installation of the first wind farm in South
Africa operated by an Independent Power Producer can be seen as a major breakthrough.
The South African government prepares the introduction of a feed-in tariff which would
create a real market, enable independent operators to invest and thus play a key role in
tackling the country’s power crisis.
In the mid-term, small, decentralized and stand-alone wind energy systems, in
combination with other renewable energies, will be key technologies in rural
electrification of huge parts of so far un-served areas of Africa. This process has only
started at very few places and the main limiting factor is lack of access to know-how as
well as financial resources.

2.1.2 Asia:

Asia – with the two leading wind countries China and India and 24’439 MW of installed
capacity – is in a position of becoming the worldwide locomotive for the wind industry.
China has again doubled its installations and Chinese domestic wind turbine
manufacturers have started for the first time to export their products. It can be expected
that in the foreseeable future Chinese and Indian wind turbine manufacturers will be
among the international top suppliers. The Indian market has shown robust and stable
growth in the year 2008. It has already a well-established wind industry which already
plays a significant and increasing role on the world markets. Further countries like South
Korea (already with 45 % growth rate in 2008) start investing on a larger scale in wind
energy and it can be observed that more and more companies are developing wind
turbines and installing first prototypes. In parallel with the market growth in the country,
it can be expected that also new manufacturers will be able to establish themselves. The
World Wind Energy Conference held on Jeju island in June 2009 is expected to push the

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development in the region. Pakistan installed its first wind farm in the year 2008 and the
Government of the country aims at further wind farms in the near future.

2.1.3 Australia & Oceania:

The region showed encouraging growth rates, reaching 1’819 MW by the end of 2008,
most of it thanks to Australia. Commitments made by the Australian government to
increase their efforts in climate change mitigation and expansion of renewable energies
create the expectation that the Australian wind energy market will show further robust
growth also in the coming years. New Zealand, after a change in government, may,
however, face major delay in its switch to renewable energy.

2.1.4 Europe:

Europe lost its dominating role as new market but kept its leading position in terms of
total installation with 66’160 MW. Germany and Spain maintained as leading markets,
both showing stable growth. The most dynamic European markets were Ireland (adding
440 MW, 55 % growth) and Poland (196 MW added, 71 % growth), the first Eastern
European country with a substantial wind deployment. All in all, the European wind
sector showed almost stagnation with a very small increase in added capacity from 8’607
MW to 8’928 MW. The biggest market Germany is expected, after the amendment of the
renewable energy law EEG, to show bigger market growth in 2009. An encouraging
change happened in the UK where the government announced the introduction of a feed-
in tariff for community based renewable energy projects. However, the cap of 5 MW

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represents a major hurdle so that the UK wind market will still grow at moderate rates.
However, without additional incentives for wind power in more EU member states, such
as improved feed-in legislation, the European Union may not be able to achieve its 2020
targets for renewable energy.

2.1.5 Latin America:

Many Latin American markets still showed stagnation in the year 2008 and the overall
installed capacity (667 MW) in the region accounts for only 0,5 % of the global capacity.
Only Brazil and Uruguay installed major wind farms in the year 2008. This slow wind
deployment is especially dangerous for the economic and social prospects of the region
as in many countries people are already suffering from power shortages and sometimes
do not have access to modern energy services at all. However, in some countries like
Argentina, Brazil, Chile, Costa Rica or Mexico many projects are under construction thus
putting lights in the forecast for 2009.

2.1.6 North America:

North America showed very strong growth in the year 2008, more than doubling its
capacity since 2006 to 27’539 MW. Breaking two world records, the USA became the
new number one worldwide in terms of added as well as in terms of total capacity. More
and more US states are establishing favorable legal frameworks for wind energy and try
to attract investors in manufacturing facilities. It can be expected that the new Obama

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administration will improve substantially the political frameworks for wind power in the
country, especially for those type of investors that have practically been excluded from
the production tax credit scheme, like farmers, smaller companies or community based
projects. The credit crunch, however, may lead to delays in project development in the
short term. The Canadian government has rather been hesitating. However, among the
Canadian provinces Quebec and Ontario are showing increasing commitment towards an
accelerated deployment of wind energy. During and after the World Wind Energy
Conference Community Power held in Kingston/Ontario in June 2008, the Government
of Ontario showed strong commitment to rapid expansion of renewable energy and is
expected to present soon a proposal for a Green Energy Act, including feed-in tariffs for
the different renewable energies including wind. In Quebec, contracts for new projects
were signed for a total of 2’000 MW, the first to be operational by 2011.

2.1.7 Offshore – Wind farms

As of 2008, Europe leads the world in development of offshore wind power, due to
strong wind resources and shallow water in the North Sea and the Baltic Sea, and
limitations on suitable locations on land due to dense populations and existing
developments. Denmark installed the first offshore wind farms, and for years was the
world leader in offshore wind power until the United Kingdom gained the lead in
October, 2008 with 590 MW of nameplate capacity installed. The United Kingdom
planned to build much more extensive offshore wind farms by 2020. Other large markets
for wind power, including the United States and China focused first on developing their
on-land wind resources where construction costs are lower (such as in the Great Plains of
the U.S., and the similarly wind-swept steppes of Xinjiang and Inner Mongolia in China),
but population centers along coastlines in many parts of the world are close to offshore
wind resources, which would reduce transmission costs.

On 21 December 2007, Q7 (later renamed as Princess Amalia Wind Farm) exported first
power to the Dutch grid, which was a milestone for the offshore wind industry. The
120MW offshore wind farm with a construction budget of €383 million was the first to
be financed by a nonrecourse loan (project finance). The project comprises 60 Vestas
V80-2MW wind turbines. Each turbine's tower rests on a monopile foundation to a depth
of between 18-23 meters at a distance of about 23 km off the Dutch coast.

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Transporting large wind turbine components (tower sections, nacelles, and blades) is
much easier over water than on land, because ships and barges can handle large loads
more easily than trucks/lorries or trains. On land, large goods vehicles must negotiate
bends on roadways, which fixes the maximum length of a wind turbine blade that can
move from point to point on the road network; no such limitation exists for transport on
open water. Construction and maintenance costs per wind turbine are higher for offshore
wind farms, motivating operators to reduce the number of wind turbines for a given total
power by installing the largest available units. An example is Belgium's Thorntonbank
Wind Farm with construction underway in 2008, featuring 5MW wind turbines from
REpower, which were among the largest wind turbines in the world at the time.

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2.1.8 SWOT Analysis

The Global wind energy program owes its success to a variety of factors relevant to its
member nations, which are to an extent equally relevant to other developed and
developing nations. The discussion below presents SWOT analysis for wind energy
program as relevant to nations wherein wind energy projects have been installed.

a) Strengths
♦ Security of supply - most EU nations rely on imported fossil fuels. Wind
energy is a massive indigenous program safeguarding against conflict and
political instability threatening energy supply.
♦ Environmental concerns - urge of the EU to curb CO2 emissions and achieve
Kyoto targets is an important consideration.
♦ Economics is an important driver – a) Competitiveness of wind power as a
consequence of dramatic fall in the cost of wind power and b) Fossil fuel price
has shot up in the recent past with little respite in the future. It makes lot of
sense to switch to renewable option on the ground of its being reasonably
competitive now.
♦ Rapid expansion and improvement in wind power technology and industry.
Wind power equipment manufacturing, service and testing organizations are
passing through a boom.

b) Weaknesses
♦ Having tapped virgin areas, sustenance of growth, research into new avenues
and cost cutting and continuation of supportive policy regime is a challenge.

c) Opportunities
♦ Application areas such as re-powering existing sites, exploiting on-shore
potential in the vicinity of EU nations as well as other global locations) and
joint initiatives with developing nations offer opportunities for EU. Wind
players to expand their on-going achievements in the future years.

d) Threats
♦ Competitive pressures from new players for global partnerships
♦ Pressure of scarce land resources
♦ Environmental concerns- land and marine, lobbies against developmental
programs.

2.2 Indian Wind Energy Sector


The Wind power programme in India was initiated towards the end of the Sixth Plan, in
1983-84. A market-oriented strategy was adopted from inception, which has led to the
successful commercial development of the technology. The broad based National
programme includes wind resource assessment activities; research and development
support; implementation of demonstration projects to create awareness and opening up of
new sites; involvement of utilities and industry; development of infrastructure capability

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and capacity for manufacture, installation, operation and maintenance of wind electric
generators; and policy support. The programme aims at catalyzing commercialization of
wind power generation in the country. The Wind Resources Assessment Programme is
being implemented through the State Nodal Agencies, Field Research Unit of Indian
Institute of Tropical Meteorology (IITM-FRU) and Center for Wind Energy Technology
(C-WET).

Wind in India are influenced by the strong south-west summer monsoon, which starts in
May-June, when cool, humid air moves towards the land and the weaker north-east
winter monsoon, which starts in October, when cool, dry sir moves towards the ocean.
During the period march to August, the winds are uniformly strong over the whole Indian
Peninsula, except the eastern peninsular coast. Wind speeds during the period November
to march are relatively weak, though higher winds are available during a part of the
period on the Tamil Nadu coastline.

A notable feature of the Indian programme has been the interest among private
investors/developers in setting up of commercial wind power projects. The gross
potential is 45,000 MW (source MNES) and a total of about 8757.2 MW of commercial
projects have been established until March 31, 2008.

The Asian continent is developing into one of the main powerhouses of wind energy. The
strongest market leader in wind energy in the continent is India. With a total of 4,430
MW of wind capacity in 2005, India is in the fourth position in the international wind
power league. The Indian Wind Turbine Manufacturers Association (IWTMA) expects
between 1,500-1,800 MW to be commissioned every year for the next 3 years. Over the
past few years, both the government and wind power industry have succeeded in injecting
greater stability into the Indian market. Incentives by the Central and State Governments
have encouraged large private and public sector enterprises to invest in wind projects
stimulating the domestic manufacturing sector. Some companies now source more than
80% of the components for their turbines. This has contributed to both more cost
effective production and additional local employment. The geographical spread of Indian
wind power has so far been concentrated, especially in the southern state of Tamil-Nadu,
which accounts for more than half of all installations. This is beginning to change with
other states including Maharashtra, Gujarat, Rajasthan and Andhra Pradesh, catching up
in this drive to tap this emerging renewable energy option. With the potential for up to
65,000 MW of wind capacity across the country, the sector can continue further strides
over the next decade. Industry and research programs are geared up to meet this
challenge. With the notable exceptions of Tamil-Nadu, Andhra Pradesh and Gujarat,
other states view wind farms more as a nuisance than a benefit, due to the low reliability
and non-dispatchability. Government policy has placed them in a position where they
have to pay higher prices for wind-generated electricity. This has caused them significant
financial hardship and has not heightened their enthusiasm and support of the technology.
In addition, India’s relatively poor infrastructure previously meant that transport and
installation of megawatt scale wind power technology was impossible (WPM, June
2004:38). In 1996 grid abnormalities induced a 20% loss in potential revenue due to
‘direct generation loss’ (inability of wind plants to operate when the wind is blowing).

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Half of all these losses are due to weak grids in the region. Utilities are suffering the
burden of having wind farms connected to their grids. The rapid growth in wind power
development in the 1990s, rendered grid capacity in the wind farm regions in Tamil Nadu
and Gujarat inefficient in accommodating the wind power. It caused frequent outages of
the grid and reduced return from the wind farms. In 1998, RISø (A national laboratory in
Denmark) and C-WET (Center for Wind Energy Technology) collaborated on a research
project to study wind power integration in weak grids in India.

2.2.1 Wind Power Development in India

The Government of India realized the importance of private sector participation in wind
power as early as 1983/84. Accordingly, a national program was initiated to tap the then
estimated potential of 20,000 MW by adopting a market-oriented strategy. This
ultimately led to a successful commercial development of wind power technology and
substantial additions to power generation capacity in the country. The reassessed gross
wind power potential of the country stands at 45,000 MW. However, the technical
potential, assuming 20 per cent grid penetration, works out to be 13,000 MW. The
technical potential would increase as the grid capacity increases.
According to the Indian Wind Association, the installed wind power capacity was 30
MW in 1990. It increased to 3,568 MW, now the fourth largest in the world. The first
wind power development was a government-supported demonstration plant in 1986.
India witnessed notable wind power developments by the late 1990s, largely due to
incentives such as accelerated depreciation allowance of capital costs and exemptions
from excise duties and sales taxes, and regionally administered feed-in tariffs. India has
been an active supporter of wind development since the 1990s. In the 1990s, India’s
market experienced a significant boom as a result of various tax incentives, attractive
buy-back rates, and some preferential loans. For example, 100% depreciation of wind
equipment was allowed in the first year of project installation, and a 5-year tax holiday
was allowed (Rajsekhar et al., 1999). The national Guidelines for Clearance of Wind
Power Projects implemented in July 1995 (and further refined in June 1996) mandated
that all State electricity boards and their nodal agencies make plans ensuring grid
compatibility with planned wind developments, and that they seek Detailed Project
Reports (DPRs) from independent consultants (for capacities above 1 MW) on all
proposed wind development projects to verify project capital costs and proposed power
generation against certified wind turbine power curves and wind data at the site, before
granting approval for projects (Rajsekhar et al., 1999). The expectations for future market
growth in the early-mid 1990s attracted a number of firms to the Indian market. India has
also developed a national certification program for wind turbines administered by the
Ministry on New and Renewable Sources (MNRS), based in large part on international
testing and certification standards. However, even with extensive government regulations
pertaining to wind farm development, inaccurate resource data, poor installation practices
and poor power plant performance led to a dramatic slowdown of installed capacity in the
Indian market in the late 1990s and early 2000s (Rajsekhar et al., 1999). Policy drivers
also became unstable during this period.
The early perception of growth prospects for India had led to the presence of local
manufacturing of wind turbines by international companies, and more recently Indian

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companies. As far as the domestic industry is concerned, there are 8 major companies
manufacturing wind turbines and components. These companies are joint-ventures or
licensee of reputed international companies, a majority of them from the EU. Of these, 5
are ISO certified. The manufacturing base not only meets domestic needs but also caters
to the emerging export markets, including Europe. The annual production capacity is of
the order of 500 MW, which can be increased to 750 MW. Large capacity wind turbines
in the range of 1 to 1.25 MW are being produced in the country. Wind turbines of 250
kW - 1,650 kW are being manufactured. These systems require an average wind speed of
about 2.5 m/s to 30 m/s velocity. Wind turbine components are exported to Europe,
Australia and the USA.

India has taken some direct steps to encourage local manufacturing. For example,
customs duties have been levied in favor of importing wind turbine components over
importing complete machines. There is no customs duty on special bearings, gearboxes,
yaw components and sensors for the manufacture of wind turbines, or on parts and raw
materials used in the manufacture of rotor blades. There is a reduced customs duty on
brake hydraulics, flexible coupling, brake calipers, wind turbine controllers and rotor
blades for the manufacture of wind turbines, and the excise duty is exempted for parts
used in the manufacture of electric generators (Rajsekhar et al., 1999). The MNES
(Ministry of Non-Conventional Energy Sources) is implementing a program on small
wind energy and hybrid systems, with the main objectives of - (i) field testing,
demonstrating, and strengthening the manufacturing base of water pumping windmills,
aero-generators/hybrid systems, and (ii) undertaking research and development for
improvements in design and efficiency of these systems. Presently, the program is being
implemented mainly in the states of Andhra Pradesh, Bihar, Gujarat, Karnataka,
Maharashtra, Rajasthan and Tamil Nadu, owing to the felt need for water pumping and
small power generation. The program is, however, being extended to other potential
states also. The program has made very slow progress and not very popular with the
beneficiaries, financial institutions, NGOs, etc. By year 2003-04, 945 water pumping
windmills, aero-generators and hybrid systems of about 370 kW capacity wind-solar
hybrid systems have been installed in the country. The program on water pumping
windmills is being implemented through the SNAs (State Nodal Agencies)/departments.
The manufacturers and suppliers of water pumping windmills are also eligible to market
them to users directly. The program on small aero-generators and hybrid systems is
implemented through the SNAs or user organizations like research institutions, NGOs,
Central and State government organizations, defense organizations, para military forces
and autonomous non-commercial institutions. Despite subsidies ranging from 30 to 75
per cent, the programs are still not popular due to a variety of reasons. The entire project
had been heavily subsidized. It was a failure for two main reasons. The equipment in use
was not adapted to Indian circumstances (hence it broke down and could not be fixed by
the locals) and the communities involved had no sense of ownership in the project.
However, a useful lesson that can be learned from this example is that these wind pumps
have a big role to play in a decentralized rural community, besides avoiding the
aforementioned mistakes. High transaction cost is also a serious concern. At times, the
user prefers grid supply, which is almost free.

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2.2.2 The Wind Energy Policy Structure in India

A range of policy support measures and incentives are announced by the government for
introducing state-of-the-art wind energy technologies on the one hand, while encouraging
private entrepreneurs to take up commercial projects on the other led to significant
progress in the sector. A tax rebate of 80 per cent on income from power generation for
the first ten years of operation has encouraged commercial investment, as has the
attraction of power supply for use in businesses. However the spurt in private sector
participation started only in 1992, after the announcement of the ‘private power policy’ of
1991. This, along with a booming

economy and attractive fiscal incentives, provided the impetus for accelerated growth of
the sector. In some cases wind farms are not well integrated, as the wind turbines produce
more power than that can be handled by the weak distribution system. The Indian
Government has been taking policy decisions with consistent efforts for over a decade
now. Ministry on New and Renewable Sources (MNRS) has set a target of realizing 10
per cent of the new capacity additions through renewable from 2012. Wind power
generation may constitute 50 Per cent of the additional renewable capacity amounting to
plus 1,200 MW of power every year. While style and content differs, the basic policy
structure is similar across states. This is to provide legal support and economic
incentives, while obligating (by means of legislation) the power company to buy
electricity from wind power, and encouraging businesses to develop wind power through
incentives such as investment, tax, and price. A number of infrastructural situations have
also spurred wind energy use. This was perhaps the strongest initiator in promoting wind
power adoption and investment. The policies adopted allowed all the other factors to flow
together in a way that made wind energy very attractive to businesses and investors.
Apart from the ongoing efforts of the Ministry on New and Renewable Sources (MNRS)
which first of all instilled confidence in the technical and commercial viability of wind
energy by performing the Demonstration Program, monitoring the entire country for
windy sites, and putting the tax incentives in place, a few other policy initiatives by the
State government of Tamil Nadu, an Indian leader state are worth also to be noted. For
example, the state of Tamil Nadu adopted the following measures:

♦ The windy sites were close to towns for accessibility in bringing labor and
providing accommodation for the personnel involved in the projects.
♦ The sites were well interlinked with highways.
♦ Grid network by Tamil Nadu Electricity board (TNEB) was well connected
and mainly passing through the sites.
♦ Most of the wind turbine manufacturers/suppliers were located in Tamil Nadu
and so gave investors confidence in the supply of machines and after-sales
service of the machines.
♦ Chennai port of Tamil Nadu has excellent facilities for import of heavy
machinery of the turbine components and this facilitated inter-state and
international transportation.
♦ Active promotional steps were taken by TNEB and the Tamil Nadu
Development Agency (TEDA). For example, TEDA took the first steps in

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setting up wind farms at sites like Muppandal, Kayathar and Kethanur to


prove the viability of wind farms.
♦ TNEB extended all facilities for private entrepreneurs like consultancy
services, processing of the application for issuance of No Objection
Certificate (NOC), and other clearances, extending grid connections to wind
farms and executing new dedicated sub-stations.
♦ TNEB established an effective system for registering the energy generation by
each turbine and so enabled turbine owners to adjust their energy bill in
accordance, or effect payment to those who sold to TNEB.
The suppliers provided turnkey solution by looking at the land development issues. This
has helped in boosting the acceptance of wind farm projects by Indian investors who do
not feel comfortable in tackling the related issues, reduce delays in execution and
negotiate the land related costs with the owners and civil contractors. However probably
the most damaging factor for the wind industry was the very thing that really started the
boom, namely the 80% (previously 100%) accelerated depreciation. The policy had a
number of negative impacts. Among these are enabled large-company finance officers to
make hasty decisions around the time of tax-filings to install wind plants. These hasty
decisions often led to bad sitting of machines and consequent low performance. The rule
relies on the ability of promoters of the technology to absorb the tax benefits - this
restricted the number of potential entrepreneurs to companies with huge profits, such as
the textile and cement industries, which were actually big investors in the technology.
Smaller entrepreneurs were not incentivized.

2.2.3 The Current Scenario

In recent years, the market has begun to re-establish itself. State governments in India are
running concession programs, and have already earmarked 50 sites for wind farm
development. In Gujarat the government has signed agreements with Suzlon, NEG
Micon, Enercon and NEPC India to develop wind farms on a build-operate-transfer
(BOT) basis, with each manufacturer given land for the installation of between 200-400
MW in the Kutch, Jamnagar, Rajkot and Bhavnagar districts (WPM, March 2004:57).
Additional policies established in certain provinces have helped to spur recent
development. India may be poised for growth with Suzlon planning global expansion, but
fundamental risks in the Indian market remain, making international manufacturers
somewhat reluctant to invest. For example, the power grid has such severe reliability
problems that day and night voltages differ. India’s policy scheme, in particular the major
tax advantages offered to manufacturers, helped to promote the industry throughout the
1990s. However, the current policy outlook is less clear, and wind power will likely be
directly affected by the current restructuring of India’s electric power industry. The
Indian government continues to show it support for wind power and has set aggressive
targets to bring 5,000 MW of new wind power capacity online by 2012 (WPM, March
2004:57).

2.2.4 Foreign Investment Policy


India has put a lot of thrust on the promotion of renewable sources of energy. It has
adopted liberal foreign investment policies in the non-conventional energy sector. Some

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of the salient features of India’s foreign investment policies in the renewable sector are as
follows:

♦ Foreign investors can enter into a joint venture with an Indian partner for
financial and/or technical collaboration and also for setting up of renewable
energy based power generation projects.
♦ Liberalized foreign investment approval regime to facilitate foreign
investment and transfer of technology through joint ventures.
♦ The proposal for up to 74 per cent foreign equity participation in a joint
venture qualifies for automatic approval.
♦ 100 per cent foreign investment as equity is permissible with the approval of
the Foreign Investment Promotion Board (FIPB).
♦ Various chambers of commerce and industry associations in India can be
approached for providing guidance to investors in finding appropriate
partners.
♦ Foreign investors can also set up a liaison office in India.
♦ The Government of India is also encouraging foreign investors to set up
renewable energy based power generation projects on built, own and operate
basis.
♦ Further, the government also provides several fiscal and financial incentives
for investments in the wind energy sector. These are available to foreign
investors. They include capital subsidy, interest rate subsidy, 80 per cent
accelerated depreciation benefit and exemption/reduction in custom duty,
sales tax, excise tax etc.

The policy adopted by the government successfully attracted several European players
who have their presence in India today, either as a wholly owned subsidiary or joint
ventures, or as technology collaborations. However, most of the investments made were
in the form of private equity in manufacturing ventures. Financial intermediation of other
forms such as debt, working capital and other sophisticated financial services such as
insurance, risk management solutions, etc. is still lacking. In the recent past, several
European banks and FIs (Financial Institutions) have entered the Indian market. Given
below is a compilation of the European banks and financial institutions operating in
India. Most European banks and FIs have not yet realized the attractiveness of the Indian
market, or consider it too risky. As per stakeholders, a couple of existing European banks
in India are active in wind energy investment. Therefore, there remains a significant
potential for financial intermediation between Europe and India.

2.2.5 Regulatory Issues

Power reforms were initiated by the Central Government in 1991.Due to this the sector is
witnessing transformation characterized by unbundling of functions, ownership changes,
the emergence of competitive markets, and the establishment of Regulatory
Commissions. In such a changing scenario government policies and regulatory
approaches are going to have significant influences on the development of grid connected
wind power.

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Setting up of the CERC (Central Electricity Regulatory Commission) and the SERCs
(State Electricity Regulatory Commission) was a key element of this process. The Central
Government passed legislations enabling the setting up of independent and autonomous
regulatory bodies at central and state levels in July 1998. These regulatory bodies are
expected to promote competition, efficiency, and economy in the consumption of
electricity, and in investments for the development of the sector. The Electricity Act 2003
has certain provisions for renewable energy sources. One additional responsibility of the
SERCs, defined by the Act, is to promote cogeneration and generation of electricity from
renewable sources. Hence it also encourages providing suitable measures for connectivity
with the grid, sale of electricity to any person, and also specifies if it considers
appropriate, for purchase of electricity from such sources, a percentage of the total
consumption of electricity in the area of a distribution license. The role of the state
governments assumes significance in wind power generation. Though the Electricity Act
2003 did away with the need for licenses for setting up small power plants in rural areas,
none of the states have notified this provision. The Electricity Act has not become fully
operational. In each state, wind farms have to sign power purchase agreements with the
respective SEBs (State Electricity Board). ERCs (Electricity Regulatory Commission) fix
the prices at which the unit of power will be purchased. While the Regulatory
Commissions are in the process of evolution, one may encounter conflicting situations
and undue interferences from the political class. Regulatory functions are expected to be
fair and unbiased to all stakeholders.

2.2.6 SWOT Analysis

The wind energy program in India is a positive development. In this context, a SWOT
analysis has been attempted with the viewpoint of enhancing the uptake of this program
in the future years.

a) Strengths
♦ Continuing demand- supply gap and escalation in the cost of fossil fuel-based
power generation and electricity tariffs for industry and organized sector.
♦ Encouragement by Central and State Government policies - fiscal incentives
such as accelerated depreciation and reasonable tariffs for industry and
organized sector.
♦ Growth in wind manufacturing sector- joint ventures as well as indigenous
industry contributing to adoption of the merging technologies, up-scaling size
of machines and cost cutting initiatives.
♦ Massive nation-wide efforts for wind resource assessment covering 25 states,
comprising 900 stations and micro-survey of sites.
♦ Setting up a well managed C-WET, an institution in the public sector with EU
support testing, R & D and advisory functions.
♦ Tactical project management orientation by wind industry, which involves
land procurement, site selection, installation of the wind generation facilities
on a turn key basis by the project developers/ equipment suppliers.

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b) Weaknesses
♦ Low capacity utilization of the wind generation plants - this is not attributed to
availability of wind but also factors such as
♦ Over- capacity due to biasing of the market mechanism to tax incentives for
installing of wind farms rather than efficient operation. This led to inadequate
resource assessment in advance of construction and poor engineering.
♦ Forced outages due to technical factors such as weak grid integration,
mechanical problems, etc.
♦ Dearth of O & M skills and service organizations.
♦ Small wind power generation program not successful due to techno- economic
considerations and inadequacy of the demonstrative efforts taken up so far.
♦ Rising land costs and developmental issues.

c) Opportunities
♦ Substantial untapped market- off- shore and on- shore.
♦ Enhancing productivity of existing installations by re- powering existing ones.
♦ CDM credits for clean technologies.
♦ Tried and tested technologies for such small applications is under developed
due to mismatch, poor project design, dearth of trouble shooting skills and
barriers in commercial operations. The small wind industry implementation
Strategy (SWIIS) project, co-coordinated by Socie’te’ d’ Etudes Et de
Development (SEED) to increase the sector’s impacts through provision of
tools such as sectoral market analyses, a catalogue of manufacturers,
comprehensive listing of available
♦ turbines, their applications and detailed information on hybrid technologies
such as wind-diesel and wind-PV. Similar initiatives are needed in the Indian
context.

d) Threats
♦ Technical progress and financial outlays may not keep pace with the
prospective markets in the future years.
♦ Wind power subsidies may be rationalized or pegged down discouraging
prospective buyers.
♦ Cost cutting may not work out favorably- land costs may shoot up & cost-
cutting ideas by equipment suppliers may dry up.

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3. Elements of a Wind Project


Larsen & Toubro will have to select from a range of business opportunities and identify
the segment/ business element in which it wants to foray into. We would now list the
various elements of a wind power project and the various activities involved in it.

3.1 Design, planning & supervision


Companies engaged in Designing, planning & supervision of Wind farm project need to
consider a multitude of disciplines and assignments, which all need proper co-ordination
and co-operation. As a multidisciplinary consulting company international experience
will be required and the various stages which would form part of the assignment are as
follow:

Energy planning
We need to establish and review national and regional energy planning and incorporate
wind energy into the planning schemes. We will have to investigate the possibilities for
combining wind energy with other energy sources with regard to economy, security of
supply and the electrical infrastructure.

Trade and transportation of energy


In the national grid, we will have to make a full economic assessment of the
transportation options and costs of wind energy. We will have to review and analyze the
trade possibilities and value benefits for wind energy with regard to sale at the national
and neighboring power spot markets compared to the unit production costs. This leads to
a trade price for the electricity to be produced. We review the opportunities in bilateral
sale to industries that wish to have a 'green image'. Finally, we analyze the development
of the electricity consumption in general to view wind energy in a larger national and
regional perspective.

Project finances
We need to perform standard financial cash-flow analysis based on different ownerships
and lending conditions for the wind project. A complete overview of the economy in a
wind project is established by means of probabilistic models. This is of high importance
as wind projects are a complex nexus of many technical and economic disciplines.
Finally, we will have to provide a financial risk analysis in which we incorporate all the
elements of the wind project and consultancy concerning project financing.

Wind studies
The wind resource, the wind measurements and macro/micro setting of the turbines need
to be assessed. The information, which is gathered, will be used in relevant software and
the project is established. When the energy output has been estimated, the turbine layout
can be optimized among other things with regard to requirements from the local
authorities.

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Environmental impact
We need to establish baselines for flora and fauna and estimate the impact on the
environment from the wind project leading to Environmental Impact Statements (EIS).
Visual impact and as well as impact from noise and flicker are examples of issues that are
assessed in the EIS. The EIS forms part of the basis on which the local authorities will
decide, whether the wind project is to be approved or not.
Assessment of met-ocean data
We will have to assess wave and current data for input to the structural design.
Furthermore, we need to investigate correlations between waves and wind, which is an
important parameter in connection with the design for fatigue. The assessment of wave
and current data is also to be used in the numerical modeling of the morphological
processes such as erosion and scour.

Geophysical investigations
We will have to specify and perform geophysical investigations and underwater video
recordings. These investigations provide input to the archaeological investigations, the
environmental impact assessment (EIA) and to the base of the structural design.

Geotechnical investigations
In order to adapt the geotechnical investigations to the specific sites, we will have to
specify the investigations in laboratories to suit the individual sites before the
investigations are carried out. Furthermore, we need to carry out and interpret the
geotechnical investigations in order to provide a base for the structural design of the
foundations of the turbines and the laying of cables.

Navigational risk analyses


For offshore wind farms, we will have to estimate the navigational risk for passing
vessels during the construction and during the operational lifetime of the wind farm. The
risk analysis provides input to the environmental impact statement, the financial risk
analysis and to the base of the structural design.

Structural design
We need to perform conceptual or detailed design of all parts of the wind project
including towers, foundations and structures for transformer platforms. The design
amongst others includes in-place analyses, spectral and time-domain dynamic analyses,
fatigue analyses, and drivability of piles. An analysis of transportation and installation is
also required.

Electrical design
We will have to provide overall grid analyses in connection with the implementation of
the wind project, electrical design options for the turbines and the interconnection of
turbines, and design of cabling to connection point/landfall.

Decommissioning
We will have to consider the decommissioning of the wind project as an integral part of

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the design, as well as an important element within the life-cycle-analyses. This element
hence will need proper attention.

Contracting of wind projects


Based on our experience within construction works and energy projects, we will have to
suggest a contract strategy. Furthermore, we might be required to perform the pre-
qualification of tenders and develop the enquiry documents. Finally, we might have to
perform the tender evaluation and the contracting.

Construction management and supervision


On behalf of the owner we might have to manage the construction and the contract for the
wind project. We might have to perform the commissioning and supervision of all site
works and tests.

Key Players:
™ Ramboll (www.ramboll-wind.com)
™ GEC - Global Energy Concepts ( www.globalenergyconcepts.com )
™ AWS Truewind (www.awstruewind.com )

L&T – related businesses @ present:


™ L&T – E&C – E&C Projects - Sargent & Lundy – Engineering Services
™ L&T – E&C – E&C Projects - Power

3.2 Pure component manufacturer


There are numerous companies which are purely into component manufacturing for the
wind turbine industry. L&T if deciding to enter this segment will surely have an upper
edge in the domestic market because of the brand name it has. Various highlights which
could be a reason to enter purely into the OEM industry are as follow:

1. Competition among wind turbine OEMs is rapidly intensifying as growth


extends to new regions, encouraging start-ups of new manufacturers while
pushing leading suppliers to expand their sales and production globally.

2. Turbine prices, and the costs of installation, have trended upward over the last
four years after nearly a decade of cost reductions per megawatt of nameplate
capacity. The global market’s boom in demand has clearly shifted the industry
from a buyer’s to a seller’s market in the past three years, with corresponding
price increases.

3. Multiple players moving on 2 MW and above segment: Vestas and Enercon—


pioneers in 2 MW and larger turbines—are aiming to protect their share of this
market. However, multiple proven machines from Gamesa, Siemens, Suzlon /
REpower, Alstom / Ecotecnia and others are providing buyers more options.

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4. Component suppliers face new challenges to keep pace with turbine demand,
calling for major production capacity investments in the multi-megawatt segment,
as well as a focus on local supply in booming new markets while keeping costs
competitive.

Key Players:

1. Rotor / Blades - LM Glasfiber ( www.lmglasfiber.com ) ; Sinoi ( www.sinoi.de )


2. Gear-box – Moventas ( www.moventas.com ) ; Bosch ( www.bosch.com )
3. Controls – Mita-teknik ( www.mita-teknik.com ) ; Ingeteam (
www.ingeteam.com )
4. Generators – ABB ( www.abb.com/windpower )
5. Towers – Siag ( www.lausitzer-industriebau.de )

L&T – related businesses @ present:

™ L&T – Electrical & Electronics – Electrical & Automation Operating Company


™ L&T – Machinery & Industrial Products
™ L&T – Engineering & Construction – Heavy Industry

3.3 Installation and Operation & Maintenance


Companies involved in Installation and Operation & Maintenance are the one’s which are
purely into installation and operation & maintainance of pre-supplied wind. When
entering this segment we need to remember that as contractors we will need to consider a
number of factors.

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Installation:

Installation costs include foundations, normally made of reinforced concrete, road


construction (necessary to move the turbine and the sections of the tower to the building
site), a transformer (necessary to convert the low voltage (690 V) current from the turbine
to 10-30 kV current for the local electrical grid, telephone connection for remote control
and surveillance of the turbine, and cabling costs, i.e. the cable from the turbine to the
local 10-30 kV power line.

Installation Costs will vary

Obviously, the costs of roads and foundations will depend on soil conditions, i.e.
how cheap and easy it is to build a road capable of carrying 30 tonne trucks.
Another variable factor is the distance to the nearest ordinary road, the cost of
getting a mobile crane to the site, and the distance to a power line capable of
handling the maximum energy output from the turbine.
A telephone connection and remote control is not a necessity, but is is often
fairly cheap, and thus economic to include in a turbine installation. Transportation
costs for the turbine may enter the calculation, if the site is very remote, though
usually they will not exceed some 15 000 USD.

Economies of Scale

It is obviously cheaper to connect many turbines in the same location, rather than
just one. On the other hand, there are limits to the amount of electrical energy the
local electrical grid can handle . If the local grid is too weak to handle the output
from the turbine, there may be need for grid reinforcement, i.e. extending the high
voltage electrical grid. It varies from country to country who pays for grid
reinforcement - the power company or the owner of the turbine.

Operation & Maintenance:

Operation and Maintenance Costs for Wind Turbines


Modern wind turbines are designed to work for some 120,000 hours of operation
throughout their design lifetime of 20 years. That is far more than an automobile engine
which will generally last for some 4,000 to 6,000 hours.

Operation and Maintenance Costs


Experience shows that maintenance cost are generally very low while the turbines are
brand new, but they increase somewhat as the turbine ages. Studies done on the various
wind turbines installed around the world since 1975 show that newer generations of
turbines have relatively lower repair and maintenance costs that the older generations.
(The studies compare turbines which are the same age, but which belong to different
generations).
Older wind turbines (25-150 kW) have annual maintenance costs with an average of
around 3 per cent of the original turbine investment. Newer turbines are on average

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substantially larger, which would tend to lower maintenance costs per kW installed
power (you do not need to service a large, modern machine more often than a small one).
For newer machines the estimates range around 1.5 to 2 per cent per year of the original
turbine investment.
Most of maintenance cost is a fixed amount per year for the regular service of the
turbines, but some people prefer to use a fixed amount per kWh of output in their
calculations, usually around 0.01 USD/kWh. The reasoning behind this method is that
tear and wear on the turbine generally increases with increasing production.

Economies of Scale

Other than the economies of scale which vary with the size of the turbine,
mentioned above, there may be economies of scale in the operation of wind parks
rather than individual turbines. These economies are related to the semi-annual
maintenance visits, surveillance and administration, etc.

Turbine Reinvestment (Refurbishment, Major Overhauls)

Some wind turbine components are more subject to tear and wear than others.
This is particularly true for rotor blades and gearboxes. Wind turbine owners who
see that their turbine is close the end of their technical design lifetime may find it
advantageous to increase the lifetime of the turbine by doing a major overhaul of
the turbine, e.g. by replacing the rotor blades.
The price of a new set of rotor blades, a gearbox, or a generator is usually in the
order of magnitude of 15-20 per cent of the price of the turbine.

Project Lifetime, Design Lifetime

The components of Danish wind turbines are designed to last 20 years. It would,
of course, be possible to design certain components to last much longer, but it
would really be a waste, if other major components were to fail earlier.
The 20 year design lifetime is a useful economic compromise which is used to
guide engineers who develop components for the turbines. Their calculations have
to prove that their components have a very small probability of failure before 20
years have elapsed.
The actual lifetime of a wind turbine depends both on the quality of the turbine
and the local climatic conditions, e.g. the amount of turbulence at the site.
Offshore turbines may e.g. last longer, due to low turbulence at sea. This may
in turn lower costs.

Key Players:

6. Shell ( www.shell.com )
7. Gamesa – ( www.gamesacorp.com )

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L&T – related businesses @ present:

™ L&T – Engineering & Construction – Construction – Infrastructure - Power


™ L&T – Engineering & Construction – Construction – Electrical Projects
™ L&T – Enigineering & Construction - E&C – Power

3.4 Fully Integrated Service Providers:


Companies engaged in providing fully integrated service provides are multinational
companies with strong base in engineering design and project management skills. In
order to enter this segment L&T will have to display strong knowledge in the field of
wind energy (which can be acquired by forming a consortium with an existing company)
and project management skills which the company already posses though in other streams
of businesses such as oil & gas, chemical refinery lump-sum turnkey projects.

Key Players:

8. Suzlon - INDIA ( www.suzlon.com )


9. GE Energy – (www.gepower.com )
10. Vestas – ( www.vestas.com )

L&T – related businesses @ present:

™ L&T – E&C – E&C Projects - Sargent & Lundy – Engineering Services


™ L&T – Electrical & Electronics – Electrical & Automation Operating Company
™ L&T – Machinery & Industrial Products
™ L&T – Engineering & Construction – Construction – Infrastructure - Power
™ L&T – Engineering & Construction – Construction – Electrical Projects
™ L&T – Enigineering & Construction - E&C – Power

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4. Larsen & Toubro Limited


4.1 Prologue
L&T was set up in 1938 as a partnership trading firm by two Danish engineers, Henning
Holck-Larsen and Soren Kristian Toubro, who had quit their jobs. In 1946, it became a
private limited company and by 1950 reached the status of a public limited company.
Table 1 gives the evolutionary picture in brief.

L&T presently has a shareholder base of nearly 1 million and employee strength of over
24,000. As a company, this multi-dimensional engineering giant is actually the nucleus of
a group of companies involved in building complexes, worksites, offices, and service
outlets at different locations all over India and abroad. Over the years, L&T has acquired
a commendable reputation for capabilities for executing engineering related projects.

Table I L&T Business History: The Milestones

- 1938 – ln-corporation as a partnership firm


- 1946 - Incorporation as a Private Ltd Co.
- I950 - L&T goes pulic. Powai Works set up
- 1961 - Audco India incorporated for manufacturing valves
- 1962 - Retirement of Soren Toubro; EWAC Ltd. set up for manufacture of
welding alloys
- 1963 - TENGL founded to manufacture crawler undercarriage parts for
caterpillars
- 1969 - Agency business abolished, formation of L&T Bottle Closure division
- 1971 - L&T McNeil set up for manufacturing Presses for tyre industry
- 1974 - Management Organization Structure and Management Planning and
Control System introduced
- 1976 - L&T Bangalore Works commences production of hydraulic excavators
- 1978 - Larsen retires. L&T Faridabad commences production of switchgear
- 1942 - ECC merged with L&T; L&T enters shipping business with two ships
- 1983 - L&T enters cement manufacturing with Awarpur plant commencing
production
- 1987 - L&T enters computer hardware with floppy discs and printers; L&T Gould
for electronic test and measured instruments
- 1988 - Cement capacity enhanced to 2.2 m tons per annum
- 1989-90 - L&T under DH Ambani (as chairman)
- 1990-93 - Repeated takeover attempts by RIL
- 1993-95 - Series of strategic alliances and tie-ups resulting in formation of L&T-
Niro. L & T-Chiyoda, L&T Sargent & Lundy, L&T Finance, and so on.
- 2003-04 – Disinvest in L&T – Cement and subsequently in L&T – Niro, L&T –
Glass (Nasik Plant) & L&T – John Deree

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Vision, Core Values, and TQM

Infrastructure - being a key bottleneck for Indian industry - was identified as the engine
of growth for the company's ambitious plans. But before that, the company needed an
ambition statement which every employee could own and share. A massive companywide
exercise for finding out what the company stood for and what its core values were was
embarked upon. The emergent statement though not sounding much different from
several other organizational vision. However, came to be owned and understood by
almost every employee because of the process of identifying the mission and peoples
involvement. The key elements of L&T's vision focused towards a world class company
dedicated to:
- excellence and professionalism
- customer delight through service
- entrepreneurial leadership
- Community service and environmental protection.

4.2 Wind Energy Industry (Porter’s Five Force analysis) –

The Intensity of Competitive Rivalry – Medium


♦ The number of players in the domestic wind energy market when it comes to
providing fully integrated service are few but the intensity of competitive
rivalry can be termed as medium as there is sufficient scope available in the
industry for all the existing players.

Bargaining Power of Suppliers – High


♦ As a wind turbine is made of a number of components and usually there are
some parts which are required to be sourced from the open market and at
times from competitors. However, each player in the fully integrated service
providing segment has some components being manufactured internally,
rotors and generators being strategically important of these. As few critical
components have long delivery time the bargaining power rests with the
suppliers.

Bargaining Power of Buyers – Low


♦ In today’s world customer is the king. However, when it comes to the wind
projects the buyers take a back seat as it is a business sector which can be
considered to be still in the development stage of its life-cycle. Hence, there
are a number of occasions where the supplier is able to govern the terms as
compared to that of a buyer.

The Threat of Substitute Product – Low


♦ As wind power still remains the cheapest source of renewable power
generation for the world the threat of substitute product is low. Wind power
projects are also the most preferred bearing in mind the large coastline, which
we posses.

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The Threat of New Entrants – Low


As the wind projects are highly capital intensive and involves large amount of
commitment in terms of capital , assets and work- force the threat of new entrants
is low . As only those organizations which have the required capabilities and are
willing to take the risk of entering a sector which can be seen as still developing
will enter the market.

4.3 SWOT analysis – L&T as an organization

a) Strengths –
♦ Diversified businesses – L&T has it’s presence in a range of diversified
businesses. During the initial years of diversification L&T had diversified into
businesses which were totally unrelated to each other. However, in recent
years the businesses have been streamlined and unrelated businesses which
were not contributing to the long term vision of the company were
disinvested. L&T is now focused on related businesses and intends to
diversify further into such businesses which are having higher RoI.
♦ Strong financial position – Q2 FY09 net profit was up 32.47% at Rs 461
crore as against Rs 348 crore in the same quarter last year. Its net sales stood
at Rs 7682.20 crore in the period under review as compared to Rs 5,499.94
crore. The company's E&C revenues stood at Rs 5,989.63 crore versus Rs
4,259.92 crore, Electrical & Electronics revenues stood at Rs 760.48 crore Vs
Rs 671.73 crore. The company’s engineering and construction (E&C) order
inflow was at 81% and added that the business showed stable margin of
11.5% (QoQ). He plans to execute larger and higher quality orders in the
engineering and construction business of the company. The operating margin
of the company was calculated after considering the cost of new initiatives in
railways power and ship building.

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b) Weakness –
♦ Decreasing order book value from Oil & Gas Sector – Oil & Gas business
unit is one of the primary revenue earners for the company. Due to the recent
slowdown in the economy and dip in oil prices have forced Oil & Gas majors
to reduce capex investment and issue of new projects (tenders). As a result of
which there have been no new order booking in the Oil & Gas sector for L&T
in the past 6 months (as on end Feb’ 09)
♦ Talent retention & acquisition – retaining existing talent and acquiring new
talent with proper know-how will be the key element for L&T in the years to
view.

c) Opportunities –
♦ Strengthening international presence – L&T has an international presence,
over the last few years its overseas earnings have grown upto 18 per cent of its
total revenue. With factories and offices located around the country, further
supplemented by a wide marketing and distribution network, L&T's image
and equity extends to virtually every district of India. Over the years the
company has proactively created the necessary infrastructure for its global
initiative with office locations USA, Europe, Middle East and Japan.The
Engineering Construction & Contracts Division made significant progress
during the years in increasing its presence in the overseas markets. The
Division secured orders from international clients located at Malaysia, USA,
UK, Brazil, Saudi Arabia, UAE, Qatar, Bangladesh, Sri Lanka etc
L&T has customers spread across various industry segments, and spread
across various geographical regions in the world. The customer profile
includes leading names such as Samsung, Chevron, Bechtel, Kvaerner, Pirelli,
Siam Michelin, Goodyear, etc. Bechtel is one of the biggest clients of L&T in
the construction business. Bechtel has outsourced a large chunk of the
rehabilitation projects in Iraq and Afghanistan to L&T and its associated
companies. L&T will have to built on its presence and previous track reocrd in
the various regions so as to gain market share and increase contribution
towards the sales revenue.

d) Threats –
♦ Interest rate risk – significant increase in the interest rates impacts corporate
capex and infrastructure investment adversely. Interest cost has gone up in
L&T because L&T has hedged all foreign currency loans into rupees. There
has been additional borrowing as compared to the previous year, the
additional borrowings are to the extent of almost Rs 2,000 crore and that’s
why there has been an interest cost increase. The total interest cost for the
company is around 6% now which was lower last year and that is
predominantly due to the hedging. L&T has completely swapped foreign
currency loans into rupee loans.
♦ Global Slowdown - The general economy slowdown will cast a gloom on the
future order intake as well the execution on account of a dent in the capex

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plans. Although the visibility exists for a 30% revenue growth over the next
one year, the future will remain uncertain for the time being.
♦ Commodity price volatility – L&T’s key raw material inputs comprise
metals, cement, bitumen etc. - A sharp surge in raw material prices impacts
margins adversely
♦ Intense competition – L&T is considered as the largest engineering &
construction conglomerate in India. However, due to liberalization and entry
of a number of new entrants the competition has intensified in the local
market. And as L&T has also forayed into international market it is also
facing stiff competition from the existing players in those particular regions.

4.4 SWOT analysis –L&T in wind energy industry

a) Strengths –
♦ In-house technology & design capabilities – L&T already has a presence in
the power engineering sector in terms of transmission grids & power plant set-
ups. Hence a strong force of engineers already conversant in the field of
power would be an added advantage
♦ Prudent acquisitions & alliances – L&T is quite prudent in acquiring
required assets & skills and wherever required in forming strategic alliances
so as to gain an added advantage over its competitors.
♦ Integrated business model - As L&T is already into an array of diversified
businesses, entering into Wind energy market would not be a difficult task.
L&T has a strong integrated business model for all its present businesses. Its
existing businesses have a strong foothold.

♦ Global Production – L&T has 2 well equipped yards - @ Hazira, India and
@ Sohar, Oman wherein various large scale project execution is carried out.
This state of the art facility will serve an added advantage to reduce cost, keep
a check on product quality and deliver the product on time.

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♦ L&T can also utilize the capabilities of its Electrical & Electronics business
unit so as to gain added advantage in entering the segment of component
manufacturing.
♦ Strong management – L&T has always had a strong management team , the
top management is made up of personalities stalwart in diverse fields with
vast business knowledge and experience. The top management has always
shown prudence when evaluating new business ventures.
♦ Focus towards new initiatives – L&T is determined to enter new business
initiatives and develop on its core competency and diversify into related
businesses. L&T is more focused in businesses with higher RoI (Return on
Investment)

b) Weakness –
♦ Cash Conversion – L&T when competing in the Wind Energy Sector will be
unaware of the cash flow cycle involved in the business.
♦ Growth in Assets overweighing growth in profits – as a new entrant into
the field of wind energy L&T will have to weigh its margin in acquiring
projects and in doing so growth in assets may overweigh the growth in profits

c) Opportunities –
♦ Environmental awareness and government initiatives – there has been
growing environmental awareness towards reducing CO2 emissions and
shifting to a greener option for power generation. Government both domestic
and world-wide have responded to increased demand of power and alternative
sources of energy are being evaluated and initiatives being taken to implement
the same.
♦ Favorable Tax Exemptions – in order to encourage organizations to set-up
and enter the renewable source of energy sector, governments are providing
favorable tax exemptions to both operators & service providers.
♦ Untapped Offshore market – though 99 % of the wind farms are on-shore
the off-shore market is gradually developing and there is a likelihood of the
early entrant having an added advantage over others

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♦ Alliances with Power Sector – there are possibilities to form alliances with
the power sector which is mostly government owned in India. However,
globally there are private suppliers of power who would be interested in
forming alliances if given a option of cheaper power generation.
♦ Vast coast lines of India and low cost – India has a vast coastline with
steady wind speeds & directions for a substantial period of the year which
could be an added advantage for wind power generation on-shore as well as
off-shore.
♦ Steady source of demand
♦ Other renewable energy opportunities seem bright

d) Threats –
♦ Technology risk – as the wind energy sector is in the first stage of the product
life-cycle there are chances of technology becoming obsolete within a short
span of time and newer advanced technologies replacing the older ones.
♦ Expiry of Federal Production TAX credits in USA may slowdown the
growth - The US Energy Bill has extended production tax credits (PTC) till
31st Dec 2009 only, creating uncertainty for wind farm developers. In the
past, US wind markets have reacted negatively to PTC not being extended.

♦ Intense competition – as there a number of players already existing in the


domestic as well as global wind energy market L&T will have to face intense
competition to be successful in which ever element it decides to enter.
♦ Foreign exchange risk – due to global economy meltdown and current state
of the U.S economy there is huge fluctuation in the foreign exchange rates and
as in the case of wind power projects there would be huge inflow and outflow
of foreign exchange the risk in exchange rate fluctuation will have cautiously
hedged.

Based on the present SWOT analysis of L&T in order to get a clearer picture we present
matrix of the businesses which could be related to the Elements of the Wind Project and
there competencies based on their present performance & capabilities

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L&T Related Departments Competencies


Low Medium High

Designing, E&C – E&C Projects - Sargent & Lundy – Engineering


Planning & Services
Supervision
Engineering & Construction - E&C – Power
Electrical & Electronics – Electrical & Automation
Operating Company
Pure Component
Manufacturer Engineering & Construction - Heavy Industry
Machinery & Industrial Products
Engineering & Construction – Construction – Infrastructure
Installation and
- Power
Operation & Engineering & Construction – Construction – Electrical
Maintenance Projects
Engineering & Construction - E&C – Power
E&C – E&C Projects - Sargent & Lundy – Engineering
Services
Electrical & Electronics – Electrical & Automation
Operating Company
Engineering & Construction - Heavy Industry
Fully Integrated
Service Provider Machinery & Industrial Products
Engineering & Construction – Construction – Infrastructure
– Power
Engineering & Construction – Construction – Electrical
Projects
Engineering & Construction - E&C – Power

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5. Opportunities in the Wind Energy Market

5.1 International Energy Market:


The wind turbine industry faces challenging times with a global recession curtailing
short-term investment in new projects. The current volatile environment is putting a
squeeze on margins. Yet from 2010 onward, the boom in wind growth is expected to
resume. We can forecast annual wind installations to grow from 27+ GW added in 2008
to nearly 60 GW added per year by 2020. But managing through the crisis requires a
thorough understanding of the wind turbine industry on a global level.

Source: Emerging Energy Research

While 2009 installations are due to suffer from financing scarcity and global economic
jitters, much of the shortfall is expected to be made up in 2010 when a new wave of pent-
up growth is expected. We can expect a new phase of stable, global growth, pushing the
market past $56 billion annually by 2015.

Following are just a few of the key trends of global wind turbine markets:
™ Wind turbine operation and maintenance is seeing rapid shifts as the industry's
scaling forces players across the value chain to assess their position.
™ Positioning along the supply chain poses a key strategic question for component
suppliers as they address increasingly sophisticated demand for larger turbine
models.
™ Effective wind turbine pricing is a major challenge for all manufacturers as they
strive to keep pace with higher volume and more complex demand.

5.1.1 Wind Power Development Strategies – Europe


Wind energy has moved firmly into the mainstream of Europe’s generation mix as the
leading source of new generation capacity in 2007, surpassing all other technologies
including thermal with nearly 8GW installed. Key factors include:

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♦ Europe remains the industry’s single largest regional market opportunity.


Turning in steady 5% compound annual market growth from 2008-2020, capacities
added from 7.8 GW to 15.2 GW, the European wind energy market is currently worth
over €12 billion annually in new installations, surpassing both North America and
Asia Pacific.
♦ Utility-driven value chain consolidation continues. Consistent EU-wide political
support for renewables urges utilities to take strong positions in wind energy, which
continues to provide opportunities for developer project and pipeline sales. At the
same time, utilities’ moving upstream to lock up capacity threatens the IPP model that
has flourished over the past five years.
♦ Independent players seeking long term positioning. Wind’s move into utility
mainstream power generation is forcing developers and IPPs to carve out geographic
or technical niches on the value chain to remain competitive in the long term. While
risk averse investment players are divesting from their turnkey-developed assets,
stronger industrial-backed players from complementary infrastructure industries are
capturing remaining opportunities.
♦ Industry rapidly moving to tap out remaining potential & optimize existing
assets. Building on the experiences of Western Europe, Eastern Europe is seeing
faster market entry and ramp up with utilities and experienced IPPs taking early
positions. While these firms move East to continue growing their pipelines, they are
increasingly focusing on optimizing turbine procurement, O&M capabilities, and
integrating wind plant into the portfolio as a long term contributor to the generation
mix.

Europe Market Opportunity and Competitive Landscape Overview

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5.1.2 Wind Power Development Strategies – United States

The US wind power market is exploding – accounting for 27% of global wind MW
additions in 2007 and resulting in over 8.6 GW under construction in 2008. Cumulative
installations grew 45% in 2007 to nearly 17 GW, a number that is expected to reach at
least 100 GW by 2020. And with the PTC likely to be extended beyond 2008, the US
market will continue to take center stage in the burgeoning wind power industry for years
to come. The key factors include:
♦ Substantial build-out in US wind turbine supply chain underway: Leading US
wind IPPs and utilities continue to seek large-scale framework turbine supply
contracts, leading to significant flux in developer-OEM relationships. While
substantial investments in new supply capacity are underway, framework contracts
typically must be signed 2-3 years in advance of project delivery. 2010 may be the
earliest year in which substantial cost competition returns to the US wind turbine
market.
♦ Utilities adopting higher-risk wind procurement strategies: US utilities are
moving steadily into wind asset ownership and project development, taking on
additional risks across the wind value chain. This growing trend in the Midwest and
Pacific Northwest is placing greater pressure on IPPs with PTC tax appetite to find
creative solutions for power off-take.
♦ Transmission issues continue to challenge US wind growth in both near and long
term: As US wind development booms, transmission expansion has fallen behind
leaving IPPs to take proactive approaches to unlock new wind resource areas. Over
the longer term, wind grid penetration will play a crucial role in determining the
potential ceiling on new wind development in key utility service territories and
regions.

Near-term Challenges to Wind IPP Growth by US Region

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S. P. Jain Institute of Management & Research EMBA

5.1.3 Wind Power Development Strategies – China

China is roaring ahead with wind power build-out on its way toward 135 GW of installed
wind capacity by 2020 -- a $300 billion investment over the period. These enormous
investment levels are intended to clean up China’s energy picture, and to support the
development of a globally competitive wind turbine supply chain, from turbines to
gearboxes and blades. The bottom line: China’s wind power explosion will have a
transformational impact on the global industry. Key factors include:
♦ China is on track to lead the global wind market in annual installations by 2011,
supported by strong political will, improving incentives, and vast natural & industrial
resources. But growth will depend on greater supply competition, improved and
enhanced transparency of project economics, and improvements in the quality of
locally manufactured turbines and wind project design. How these factors evolve will
determine the size and nature of opportunities in the decade ahead.
♦ China’s wind development value chain is evolving, with major state generators
consolidating their presence while IPPs and foreign entrants seize opportunities as
project owners, operators, and technical consultants. China’s industry-wide demand
for project management and technical skills will perpetuate opportunities for foreign
ownership, executed in the form of equity-based partnerships.
♦ Turbine and component manufacturers are stepping up to meet booming
demand, striking a balance between quality, production capacity, cost, and local
content. China’s national wind power base initiative is creating opportunities for
manufacturers to scale up their product offering to capture mega-scale project
contracts as well as potential export sales. As the market matures, rapid supply chain
build-up should introduce reliable sourcing options for all players, enabling greater
standardization in quality and pricing.

5.1.4 Wind Power Development Strategies – Offshore

Offshore wind is an emerging industry and a new user of the sea with distinct industrial
and political development requirements compared to onshore wind power. Offshore wind
power technology builds on onshore wind technology, and its future development will
require participation from other sectors such as offshore oil and gas engineering and
technology, the logistical skills of offshore service providers, transmission system
operators and the infrastructure technology of the power industry. Although long-term
prospects for offshore wind power are promising, the technology faces a number of
challenges in terms of technological performance, lack of skilled personnel, shortage of
appropriate auxiliary services (e.g. crane vessels), impact on the local environment,
competition for space with other marine users, With just over two dozen operational
projects globally, offshore wind is nearing a critical phase requiring major investments to
secure its future in the generation mix. With 1 GW of offshore wind now in service, the
global market is expected to grow 40-fold by 2020. But offshore’s success will hinge on
turbine and foundation technological advances, development of know-how across the
project value chain, and increasing logistics capacity. Key factors include:

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S. P. Jain Institute of Management & Research EMBA

♦ Project size increasing: Offshore wind is entering a critical phase in which projects
are to move from 100 MW to 400 MW and larger – requiring a major scaling up and
technology specialization across the industry.
♦ Europe offshore serving as model for North America and Asia projects: Europe
is set for paced offshore expansion though 2020, with the UK, Germany, and Sweden
driving future growth. North America will begin to take off after 2011, following the
first phase of Cape Wind. Asia will be driven by pilot projects in China, South Korea,
and Taiwan that are set for construction in 2010.
♦ IPPs moving into project development space: Many IPPs are looking to partner
with utilities to realize their offshore projects. As financing becomes more readily
available and project costs decrease in the longer term, the opportunities for IPPs to
become offshore wind plant owners and operators will increase together with their
share of the market.
♦ Utilities leveraging onshore experience offshore: Experience acquired by power
producers developing and managing onshore wind plant can be leveraged into
offshore expansion as these players look to further diversify their energy mix.
♦ New market offers supply chain challenges: To realize the large scale the market
promises, developers must first secure a steady flow of permitted, well financed
projects that will justify major supply chain investments by players that currently
focus more on oil and gas offshore, such as EPC contractors and installation vessel
operators.
On the industry side, the challenge is to create a sustainable offshore wind industry.
While the onshore wind industry is starting to be integrated at European level, offshore
wind is still primarily based around a limited number of European Member State markets.
No series production in offshore wind manufacturing and installation has yet been
established, and the sector is still developing and utilizing large specialized components
rather than the standard components needed for reducing cost. The different challenges of
offshore wind require the industry to move more swiftly to establish links across borders
and develop a European industry for a European market. The creation of such
partnerships, necessary in order to deliver complex offshore projects, will inspire greater
confidence in industry players to develop the techniques and technologies that will enable
the sector to expand rapidly, as onshore wind power has done.

Leading Global Offshore Wind Energy Markets

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S. P. Jain Institute of Management & Research EMBA

5.2 Domestic Energy Market:


India ranks fourth in the world in wind energy potential. Wind energy companies have
shown robust growth and some alliances and transactions have also emerged in this space
between global and Indian companies. Given the technological evolution happening in
this sector, the growth prospects continue to be very good. High demand coupled with
supply constraint has meant that turbine prices have been rising sharply. Technology
access and availability of wind sites is going to be important for new entrants. India could
also emerge as a manufacturing hub for some components for turbines for the region.
Looking at the success of existing players, many new entrants are waiting in the wings to
enter and looking for technology partners for the same.

The major issues currently being faced by the renewable energy sector are as the
following:

♦ High capital costs and low plant load factors make renewable energy more expensive.
Given the heavily subsidized nature of electricity in the Indian context and the poor
financial condition of the State Governments, the ability to absorb the higher cost of
renewable electricity is a major concern. However, technological evolution in
renewables and the huge power deficit in the country has meant that power utilities
are actively looking towards renewables to complement their supply
♦ Regulatory certainty on tariff and other conditions of power procurement will
continue to remain crucial for maintaining private sector interest in this area
♦ Adoption of renewable energy technologies in certain cases may lead to increased
competition for land-use which will need to be managed whenever usage of such
technologies becomes more wide spread
♦ In some instances, the capacity of the transmission network has also been seen to be a
constraint in power evacuation. Lack of grid presence in remote areas where
renewable energy opportunities may be distributed hence becomes an issue

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S. P. Jain Institute of Management & Research EMBA

6. Strategies for the Wind Energy Sector

In order to determine the strategy for L&T’s to enter into the Wind Energy Sector we
would first enlist the key success factors in the wind market.

a) Design, planning & supervision


♦ Being at the forefront of technology e.g. advanced atmospheric modeling and
measurement
♦ Skilled & experienced professional team member

b) Pure component manufacturer


♦ Capability to pursue constant innovation e.g. light weight rotor blades

c) Installation and Operation & Maintenance


♦ Technological capability to carryout installation in all conditions e.g. offshore wind
turbines
♦ Strong Project management skills

d) Fully integrated service providers


♦ Ability to offer best in class
♦ Tie-up with suppliers
♦ Technological advances to carry-out O&M in adverse conditions within the stipulated
time
♦ Deep understanding of the latest wind technologies

Ability to provide complete package from Designing & Planning to Operation &
Maintenance
Understanding of country specific regulatory issues

Pre- entry Strategies –


1. Determine alignment with organizational goals & vision
2. Determine attractiveness of Onshore & Offshore Wind-farm Business Segment
3. Determine the element of wind project to enter
4. Evaluate synergy between existing capabilities and required new capabilities
5. Calculate funds needed for entry
6. Propose a Risk Management Plan

Post – entry Strategies (Short term)-


♦ Skill amalgamation
ƒ Blend the best possible skills / resources across the globe
ƒ Set-up R&D facility in Europe i.e. close to the vicinity of maximum phenomenon
in wind energy market

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S. P. Jain Institute of Management & Research EMBA

ƒ Utilize low cost labor and skill set availability for manufacturing by setting up
plants in India & China
♦ Continuously reduce cost per unit of power generation and also maintain a consistent
new product launch schedule
♦ Set-up headquarters in Denmark as it is the hub for wind energy market
♦ Form an extensive network of component suppliers
♦ Provide end to end solutions to the clients needs

Post – entry Strategies (Long term)-


♦ Go in for vertical integration

♦ Continuing rapid growth


♦ Acquisitions & consortiums
♦ Being in the profitable sector – US & Europe
♦ Improve value to Share Holders
♦ Improve operational efficiency
♦ Manage backlog
♦ Improve industrial relationships

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1. Country-wise capacity details (as on end 2008)

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2. India – Policy & Regulation
™ Ministry of Non-conventional Energy Sources, Government of India -
http://mnes.nic.in/

™ Ministry of Power, Government of India - http://powermin.nic.in/

™ Planning Commission, Government of India - http://planningcommission.nic.in/

™ Central Electricity Authority - http://cea.nic.in/

™ Central Electricity Regulatory Commission - - http://www.cercind.org

™ Maharashtra Electricity Regulatory Commission - - http://www.mercindia.com

™ Karnataka Electricity Regulatory Commission - http://www.kerc.org/

™ Madhya Pradesh Electricity Regulatory Commission - http://www.mperc.org/

™ Tamil Nadu Electricity Regulatory Commission - http://tnerc.tn.nic.in/

™ Orissa Electricity Regulatory Commission - http://www.orierc.org/

™ Rajasthan Electricity Regulatory Commission - http://www.rerc.gov.in/

™ Uttranchal Electricity Regulatory Commission - http://www.uerc.org/

™ Uttar Pradesh Electricity Regulatory Commission - http://www.uperc.org/

™ Haryana Electricity Regulatory Commission - http://herc.nic.in/

™ Himachal Pradesh Electricity Regulatory Commission - http://hperc.nic.in/

™ Andhra Pradesh Electricity Regulatory Commission - http://www.ercap.org/

™ Gujarat Electricity Regulatory Commission - http://www.gercin.org/

™ West Bengal Electricity Regulatory Commission - http://wberc.net.in/

™ Northern Regional Load Despatch Centre - http://www.nrldc.org/

™ Southern Regional Load Despatch Centre - http://www.srldc.org/

™ Eastern Regional Load Despatch Centre - http://www.erldc.org/

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™ Western Regional Load Despatch Centre - http://www.wrldc.org/
Technical

™ The Energy and Resources Institute - http://www.teri.res.in/

™ Centre for Wind Energy Technologies, Chennai - http://www.cwet.tn.nic.in/

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3. India – State-wise installed capacity

State-wise Wind Power Installed Capacity In India

Total
Gross Technical
Capacity
State Potential Potential
(MW) till
(MW) (MW)
31.03.08

Andhra Pradesh 8275 122.5 1750


Gujarat 9675 1252.9 1780
Karnataka 6620 1011.4 1120
Kerala 875 10.5 605

Madhya Pradesh 5500 187.7 825


Maharashtra 3650 1755.9 3020
Rajasthan 5400 538.8 895

Tamil Nadu 3050 3873.4 1750


West Bengal 450 1.1 450
Others 2990 3.2 -

Total

(All India) 45195 8757.2 12875

Installed Capacity - (Comparative)

State Mar-08 Mar-07 Mar-06 Mar-05


Tamil nadu 3873.4 MW 3492.7 MW 2894.6 MW 2037 MW
Karnataka 1011.4 MW 821.1MW 584.5 MW 410.7 MW
Maharashtra 1755.9 MW 1487.7 MW 1001.3 MW 456.2 MW
Rajasthan 538.8 MW 469.8 MW 358.1 MW 284.8 MW
Andhra Pradesh 122.5 MW 122.5 MW 121.1 MW 120.6 MW
Madhya Pradesh 187.7 MW 57.3 MW 40.3 MW 28.9 MW
Kerala 10.5 MW 2 MW 2 MW 2 MW
Gujarat 1252.9 MW 636.6 MW 338 MW 253 MW
West Bengal 1.1 MW 1.1 MW 1.1 MW 1.1 MW
Total 8754.0 MW 7090.8 MW 5341 MW 3594.3 MW

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4. India – Tariff & Regulations

Cross
subsidy
Tariffs fixed by Validity Charges surcharge
RPS(%)
State commissions in INR of tariff for captive for sale to
specified
per kWh (year) users 3rd party
in INR per
kWh
10 %
(includes
5% for
banking if
Tamilnadu 10% 2.90 (fixed) 20 applicable) 1.08

Karnataka 7-10% 3.40 (fixed) 10 * 0.79

3.50 + escalation of
Maharashtra 3-6% 0.15 on an annual basis 13 * NIL
3.59 + escalation of
0.02 for the first 12
years + escalation of
0.01 for the balance 8
Rajasthan 7.50% years 20 10% 0.27
Andhra
Pradesh 5% 3.37 (fixed) 5 * 1.81
4.03 reducing at 0.17
per year till the 4th
year; subsequently 2% plus
Madhya fixed at 3.36 till the transmission
Pradesh 10% 20th year 20 charge 1.03
Not
Kerala 3% 3.14 (fixed) 20 5% Notified
4.00 (fixed, to be used Not
West Bengal 3.80% as a cap) Flexible 2% Notified
Gujarat 2% 3.37 (fixed) 20 4% 1
4.08 (with 1.5 %
Haryana 3-10% escalation per year) 5 2% NIL

* Based on capacity charge plus transmission / distribution losses as per the order

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5. India – Central Incentives
Now we would like to highlight the various incentives which are offered to companies
involved in the wind energy sector - manufacturing, installation and operation.

A. Indirect Taxes

I. Custom Duty for Wind Energy Equipments and Components (Notification


No.21/2002-custom dated 01.03.2002, as amended by Notification No.11/2006
customs dated 01.03.2006) Description of Goods

Rate

i) Wind operated electricity generators upto 30 kW and wind operated battery chargers
upto 30 kW – 5%

ii) Parts of wind operated electricity generators for manufacturer/maintenance of wind


operated electricity generators, namely :
a) Special bearing 5%
b) Gear Box 5%
c) Yaw components 5%
d) Wind turbine controllers 5%
e) Parts of the goods specified at (a) to (d) above 5%
f) Sensors 25%
g) Brake hydraulics 25%
h) Flexible coupling 25%
i) Brake calipers 25%

iii) Blades for rotor of wind operated electricity generators for the
manufacturers/maintenanceof wind operated electricity generators. – 5%

iv) Parts for the manufacturer/maintenance of blades for rotor of wind operated electricity
generation – 5%

v) Raw materials for manufacturer of blades for rotor of wind operated electricity
generators - 5%

Conditions:

(a) If the importer at the time of importation furnishes in all cases, a certificate to the Dy.
Commissioner of Customs or Assistant Commissioner of Customs as the case may be,
from an officer not below the rank of Deputy Secretary to the Government of India in the
Ministry of Non-Conventional Energy Sources recommending the grant of this

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exemption and in the case of the goods at (ii) to (v) the said officer certifies that the
goods are required for the specified purposes; and

(b) Furnishes an undertaking to the said Dy. Commissioner of Customs Assistant


Commissioner to the effect that -
(i) In the case of wind operated electricity generators upto 30 kW, or wind
operated battery chargers upto 30 kW, he shall not sell or otherwise dispose off, in
any manner, such generators or chargers for a period of two years from the date of
importation.

(ii) In case of other goods specified at (ii) to (v), he shall use them for the
specified purpose, and

(iii) In case he fails to comply with sub-conditions (i) or (ii), or both conditions,
as the case may be, he shall pay an amount equal to the difference between the
duty leviable on the imported goods but for the exemption under this notification
and that already paid at the time of importation.

II. Excise Duty [Notification No.6/2002 dated 01/03/2002 (S.No.237 non-conventional


devices/systems)(Notification No.6/2006 C.E. Dated 01/03/2006)]

Devices/Systems exempted from Excise Duty:

(i) Wind operated electricity generator, its components and parts thereof including rotor
and wind turbine controller.

(ii) Water pumping wind mills, wind aero-generators and battery chargers.

III. Sales Tax

Exemption/reduction in Central Sales Tax and General Sales Tax are available on sale of
renewable energy equipment in various states.

B. Direct Taxes

1. Accelerated Depreciation benefit u/sec. 32 Rule 5 up to 80% of the project cost in the
first year plus additional depreciation @ 20% for projects being commissioned after
March 2005 with new plant & machinery.

2. Exemption on Income Tax on earnings from the project u/sec. 80 IA for 10 years

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6. Related Companies
Designing & Planning Companies:

™ Ramboll (www.ramboll-wind.com)
™ GEC - Global Energy Concepts ( www.globalenergyconcepts.com )
™ AWS Truewind (www.awstruewind.com )

Pure component manufacturer:

™ Rotor / Blades - LM Glasfiber ( www.lmglasfiber.com ) ; Sinoi ( www.sinoi.de )


™ Gear-box – Moventas ( www.moventas.com ) ; Bosch ( www.bosch.com )
™ Controls – Mita-teknik ( www.mita-teknik.com ) ; Ingeteam ( www.ingeteam.com )
™ Generators – ABB ( www.abb.com/windpower )
™ Towers – Siag ( www.lausitzer-industriebau.de )

Installation and Operation & Maintenance:

™ Shell ( www.shell.com )
™ Gamesa – ( www.gamesacorp.com )

Fully Integrated Service Providers:

™ Suzlon - INDIA ( www.suzlon.com )


™ GE Energy – (www.gepower.com )
™ Vestas – ( www.vestas.com )

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7. Larsen & Toubro Limited – Organizational Structure

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References:
1. World Wind Energy Report – 2008

2. Renewables 2007 – Global Status Report

3. Global Wind Energy Council – www.gwec.net

4. Wind Power: Capacity Factor, Intermittency, and what happens when the wind
doesn’t blow? – Renewable Energy Research Laboratory, University of
Massachusetts at Amherst

5. Policy Paper on Collaboration between European & Indian Wind Sector –


www.euindiawind.net

6. Delivering Offshore Wind Power in Europe – by European Wind Energy


Assosiation

7. India Energy Outlook – 200 7 – KPMG Report

8. http://www.wwindea.org

9. http://www.awea.org

10. http://www.windpowerindia.com

11. http://www.mongabay.com/igapo/technology/EPC.html

12. http://en.wikipedia.org/wiki/Wind_power

13. http://www.larsentoubro.com/lntcorporate/common/ui_templates/homepage_news
.aspx?res=P_CORP

14. http://www.cwet.tn.nic.in/html/information_wtt.html

15. http://www.windpower.org/en/tour/econ/oandm.htm

16. http://www.worldwatch.org/node/5282#wind

17. http://cii.in/documents/Policyreport.pdf

18. The effects of integrating Wind Power on transmission systems – Planning,


Reliability, and Operations – prepared by – GE Energy (March – 2005)

19. Indian Wind Turbine Manufacturers Association


http://www.indiawindpower.com

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20. http://www.emerging-energy.com/user/marketstudies.aspx?catid=1

21. www.newenergyfinance.com

22. http://www.moneycontrol.com/india/news/results-boardroom/lt-eyes-larger-high-
quality-orders-for-ec-biz/361393

23. http://www.moneycontrol.com/news_html_files/news_attachment/2008/LarsenTo
ubro-16-10-08-PL1.pdf

24. http://www.lntenc.com/lntenc/ezine/jan-
09/Performance_for_the_quarter_ended_dec08.pdf

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